The approaches and experiences of Chinese firms wanting to establish an overseas presence are nothing if not disparate, as a panel discussion at the recent annual conference of the Inter - Pacific Bar Association (IPBA) in Beijing highlighted. And while it is early days yet, the firms that find the most workable model stand to make significant gains - particularly in the intra-Asian legal services arena.
The most direct approach is to open office overseas, regulatory constraints notwithstanding. Usually done to 'follow the client', this is, however, usually the most expensive option, especially in the exorbitant rental environments of Tokyo, Hong Kong and New York. Jun He's Audrey Chen maintained that her firm's New York office, opened in 1993, had been profitable "from day one", but the ranks of firms that have tried and failed in overseas markets should serve as a guard against excessive expansion. One example is US firm Cleary Gottlieb, which was forced to close its underperforming one-partner Tokyo office last April.
The key to reducing the risk is to go in with a guaranteed and existing client base, a situation that apparently led to Zhong Lun's Tokyo office opening in October last year. "The office is still very young and there were substantial set-up costs, so it's not yet showing a profit," said partner with the firm, Shirley Xu, "but the partners in the Japan practice have a very strong Japanese client base and we felt opening a Tokyo office would allow us to service those clients more efficiently." She will no doubt be monitoring the office's P&L closely for the next few quarters.
Zhong Lun is one of two Chinese firms to have made a commitment to the Japanese market. Another is King & Wood, and that firm's decision to go down the formal alliance route and put all its eggs in the basket of Miyake & Yamazaki is an interesting one, especially when approached from the opposite angle. King & Wood and Miyake & Yamazaki have had an exclusive formal alliance since 2005, and while King & Wood's first Tokyo managing partner Yang Yuhong has since jumped ship to Zhong Lun, the sagacious Nobuo Miyake for one is convinced that the alliance is the way to go. Pointing out that Japanese companies currently do more trade with China than with the US, the founding partner of Miyake & Yamazaki and architect of the alliance said: "If I'm a Japanese company wanting to enter the China market I need to do a lot of homework, and the best scenario is to have access to Chinese lawyers in Japan. Equally, if I'm a Japanese company in the China market, I need lawyers in China but ones I know about and can trust." The alliance, he said, fulfils both these needs.
Miyake explained that there were plenty of differences to be addressed during the fairly long period it took to form the alliance, but that the final agreement was based much more on trust than a written contract. Three Chinese lawyers currently work in Miyake's Tokyo offices, and he plans to send Japanese lawyers to work in King & Wood's China offices soon.
Shanghai firm AllBright, on the other hand, does plan to open offices overseas in the future, but is currently happy with a number of "practical rather than formal legal JVs" with firms overseas. With the venue for this discussion being the IPBA, it was clear that most firms were using international legal associations as well as more formally structured groups such as Lex Mundi to foster overseas business. Yet regardless of the approach that firms are employing, it would be surprising if they did not find a way over the next five or 10 years to make being overseas as profitable as serving the domestic market. And at that juncture, we might have to reconsider what we immediately understand from the term 'international law firm'. ALB
